A small feud with BP

Ashgabat, 30 July 2012 (nCa) — BP conducted a presentation in Ashgabat on 16 July 2012 in connection with the launching of the latest edition of its Statistical Review. This proved to be an opportunity to confront BP on its duplicitous practices.

This is the first time that the BP Statistical Review acknowledges a figure that is closer to the actual gas reserves of Turkmenistan.

For many years this so-called industry bible kept giving a ridiculously small figure about gas reserves of Turkmenistan. This was the prime source of confusion and skepticism. Every time Turkmenistan started negotiating a gas export project, several ‘analysts and experts’ quoted the BP Statistical Review to assert that Turkmenistan doesn’t have enough gas to meet its present and future obligations.

It caused some damage to Turkmenistan but it caused a lot more damage to BP because by insisting on a small figure presumably taken out of the hat, BP curtailed its own ability to negotiate with Turkmenistan. This was also hurtful to those who trusted BP Statistical Review but not the government of Turkmenistan – under the erroneous impression that Turkmenistan doesn’t have enough gas, they didn’t seriously explore any prospects for cooperation with Turkmenistan, leaving the field open for those who decided to trust the statistics provided by Turkmenistan.

It was in this backdrop that nCa confronted Christof Ruhl, the group chief economist and vice president of BP, who conducted the presentation. As can be seen from the transcript below, BP doesn’t have any answers because it did what it did, deliberately.

The sudden change of heart (the latest edition of Review gives Turkmen gas reserves at 24.3 trillion cubic meters, quite close to government figures) cannot be attributed to any sense of fairness and professionalism. It seems motivated more by the need of BP to get on the right side of the Turkmen government now that some opportunities are emerging where BP can benefit immensely. [More on this has been given in our commentary in our subscription-based News Bulletin on 18 July]

The fact of the mater is that because of their ingrained corporate culture, some multinationals, especially the likes of BP, Chevron and ExxonMobil, cannot refrain from encroaching on the sovereignty of the host countries, particularly when the annual budget of the host country happens to be a small fraction of the annual budget of these corporations. It is not a cynical point of view; it is a fact of life.

Here is the transcript of nCa/BP confrontation:

nCa: My question is about the gas reserves of Turkmenistan. You said that you get the data from the government; you incorporate it [into the BP Statistical Review}.

To me, it looks like a cock and bull story because for many years your book [Statistical Review] was giving a ridiculously small figure on the gas reserves of Turkmenistan, knowing fully well that it was not correct.

In your opening remarks you said that [in the BP Statistical Review] you try to give a picture of the energy market during the last year but for many years you were not giving this picture completely and correctly.

Could you tell us what was preventing you from giving a correct picture [of Turkmenistan’s gas reserves] because reliable data was available since 2009 at least when GCA certification figures started coming out.

This is the first question. The second question is, do you understand that giving the wrong figures in your guide prevents your ability to interact fruitfully with the countries you are talking about, it also prevents other countries who rely on your data to interact fruitfully with such countries.

BP: Let me take the second question first. I have strong reservations against the terms right and wrong when it comes to different classification systems.

Of course, we understand fully well what it means for our reputation, the reputation of these numbers that is high, and for the continued use of BP Statistical Review as a source of reference which provides the numbers as accurate as they are available. That is the ebst we can do.

As I said before, to the first question let me give two answers. Any data collection needs some organizing principle. It is no good if we go out and say that we think this country has x resources, this country has y resources and this country has z type of resources. This would make no sense at all.

In our view, the best guide for having some coherence in the global resource numbers between very, very different systems in countries and classifications of a technical nature as well is to take the official numbers where they are available.

And, it is a big IF.

For example, you have a big neighbour country – Russia – where you have no official reserve numbers available. But there are large companies including private companies that are required to publish the numbers. In that case it is very easy for us. We just go the company, get its reports, and aggregate it up.

The only decision we thus have to make is do we stick to the ABC system or do we stick to the P1 system. So far, we have stuck to the ABC system. At some point in future we will shift to the P1 system because the numbers are available.

In Turkmenistan, very similar story. As long as we get an official number, we will take that number. And we evaluate it, we make it clear as we did in a footnote on page 44 [of BP Statistical Review] where it comes from, what the classification system it, and wht the conversion factors are.

That is what we did before [word not clear on audio file], based on a time series of all published results and that is what we are doing now that we have an official number.

And, as I said, that is a completely legitimate procedure.

The only question that exists in this is at which point the countries in the former Soviet Union shift to the proof reserve system from the ABC system.

We have, so far, taken for the entire Soviet Union, not just Turkmenistan – including Russia, including Azerbaijan – we have taken the ABC system because that is totally [words not clear on the audio file].

As soon as enough information and data is available we will switch the entire region to the proof reserve system.

We do not make exceptions for single countries, we do not report differently for different countries of the region. There is no big story, there is no big secret, and no different treatment of different countries.

nCa: You are right but my question still remains the same. For three long years you kept quiet about the actual reserves of Turkmenistan. Since 2009, Turkmenistan started reporting 24 trillion cubic meters of reserves. If you switch the systems, it still comes to 19 trillion cubic meters. But you didn’t reflect that. You gave a very small figure, which is just one field, not the whole of Turkmenistan.

BP: No, we have. We have taken what we got [words not clear on the audio file]. And, one of the features of the Statistical Review, if you look at it, is we don’t freeze the data, we update them. [Several words no clear on the audio file], which is how we operate. If there is a change in the data, we always change it. The goal is to always have the most latest updated numbers. It is necessary and important to us.

[several words not clear on the audio file] in a clear, identifiable category, and that is what we have done in the case of Venezuela.

I will give you a completely different example. There was always this issue in oil: How to classify the reserves in oil sands.

Because full proof reserves of Canada are very small, much smaller than they actually produce. In the case of Canada, for years, we have resolved this matter by taking a distinction which looks at oil sands under actual development, where the production was actually going on. Those we included in the reserves, the big numbers of the Canadian government we did not; annoyed the Canadian government for many years.

When oil sands became more developed in Venezuela – but data is more sparse in Venezuela, you cannot make a distinction between the reserves under actual development and other reserves. So we have to take the overall numbers and so this year we switched [Venezuela] to the Canadian system so that we have the overall numbers as well and the development [figures too], just for the principle of keeping it comparable. And we have applied it here as well.

As countries move closer to each other, as the industry continues to integrate, the reserve numbers become less disputed, less secret and more unified along the same method of measurement —- but right now we don’t have that and so what we have to do in this case is to make sure that we are clear and transparent, about the differences as we are in the case of ABC and P1, P2.